While we are sure the governments and their IMF handlers will find a way around such annoyances as the rule of law, the Greek Supreme Court just ruled that the seizure of bank deposits due to debts to the state without previous notice was against the Constitution. We humbly suggest the Ukrainian courts be rapidly brought to a decision on the same ruling, before IMF hands start dipping into pockets.

Greece’s Supreme Court ruled that the seizure of bank deposits due to debts to the state without previous notice was against the Constitution. The judges had taken up a debtor’s complaint filed in 2006. The debtor had seen his pension being grabbed from his bank account due to debts to the tax office.

The court ruling is provisional, judges are expecting to take the final decision on a session on May 5th 2014.

“The sharp deterioration of the public finances in many countries has revived interest in a “capital levy”— a one-off tax on private wealth—as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair).

There have been illustrious supporters, including Pigou, Ricardo, Schumpeter, and—until he changed his mind—Keynes. The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away (these, in turn, are a particular form of wealth tax—on bondholders—that also falls on nonresidents).

There is a surprisingly large amount of experience to draw on, as such levies were widely adopted in Europe after World War I and in Germany and Japan after World War II. Reviewed in Eichengreen (1990), this experience suggests that more notable than any loss of credibility was a simple failure to achieve debt reduction, largely because the delay in introduction gave space for extensive avoidance and capital flight—in turn spurring inflation.

The tax rates needed to bring down public debt to precrisis levels, moreover, are sizable: reducing debt ratios to end-2007 levels would require (for a sample of 15 euro area countries) a tax rate of about 10 percent on households with positive net wealth.